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2012 Tax Form 1040ez

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2012 Tax Form 1040ez

2012 tax form 1040ez Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. 2012 tax form 1040ez Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. 2012 tax form 1040ez For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. 2012 tax form 1040ez Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. 2012 tax form 1040ez See Passive Activity Deductions, later. 2012 tax form 1040ez Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. 2012 tax form 1040ez However, there is a special allowance under which some or all of your passive activity loss may be allowed. 2012 tax form 1040ez See Special $25,000 allowance , later. 2012 tax form 1040ez Definition of passive activity loss. 2012 tax form 1040ez    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. 2012 tax form 1040ez See Passive Activity Income and Deductions , later. 2012 tax form 1040ez   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. 2012 tax form 1040ez For details on net active income, see the Instructions for Form 8810. 2012 tax form 1040ez For the definition of passive activity gross income, see Passive Activity Income , later. 2012 tax form 1040ez For the definition of passive activity deductions, see Passive Activity Deductions , later. 2012 tax form 1040ez Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. 2012 tax form 1040ez Allocation of disallowed passive activity loss among activities. 2012 tax form 1040ez   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. 2012 tax form 1040ez The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. 2012 tax form 1040ez Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. 2012 tax form 1040ez Loss from an activity. 2012 tax form 1040ez   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. 2012 tax form 1040ez   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. 2012 tax form 1040ez See Significant Participation Passive Activities , later. 2012 tax form 1040ez Example. 2012 tax form 1040ez John Pine holds interests in three passive activities, A, B, and C. 2012 tax form 1040ez The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. 2012 tax form 1040ez Therefore, a ratable portion of the losses from activities A and B is disallowed. 2012 tax form 1040ez He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. 2012 tax form 1040ez   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. 2012 tax form 1040ez The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. 2012 tax form 1040ez Excluded deductions. 2012 tax form 1040ez    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. 2012 tax form 1040ez See Recharacterization of Passive Income , later. 2012 tax form 1040ez Separately identified deductions. 2012 tax form 1040ez   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. 2012 tax form 1040ez   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. 2012 tax form 1040ez   Deductions that must be accounted for separately include (but are not limited to) the following deductions. 2012 tax form 1040ez Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. 2012 tax form 1040ez See Active participation , later. 2012 tax form 1040ez Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. 2012 tax form 1040ez See Active participation , later. 2012 tax form 1040ez Losses from sales or exchanges of capital assets. 2012 tax form 1040ez Section 1231 losses. 2012 tax form 1040ez See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. 2012 tax form 1040ez Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. 2012 tax form 1040ez The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. 2012 tax form 1040ez For more information, see Regulations section 1. 2012 tax form 1040ez 469-1(f)(4). 2012 tax form 1040ez Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. 2012 tax form 1040ez The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. 2012 tax form 1040ez Credits that are included in figuring the general business credit are subject to the passive activity rules. 2012 tax form 1040ez See the Instructions for Form 8582-CR for more information. 2012 tax form 1040ez Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). 2012 tax form 1040ez You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. 2012 tax form 1040ez You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. 2012 tax form 1040ez Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. 2012 tax form 1040ez This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. 2012 tax form 1040ez For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. 2012 tax form 1040ez Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. 2012 tax form 1040ez These rules do not apply to C corporations. 2012 tax form 1040ez For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. 2012 tax form 1040ez Passive Activities There are two kinds of passive activities. 2012 tax form 1040ez Trade or business activities in which you do not materially participate during the year. 2012 tax form 1040ez Rental activities, even if you do materially participate in them, unless you are a real estate professional. 2012 tax form 1040ez Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . 2012 tax form 1040ez Treatment of former passive activities. 2012 tax form 1040ez   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. 2012 tax form 1040ez You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. 2012 tax form 1040ez Treat any remaining prior year unallowed loss like you treat any other passive loss. 2012 tax form 1040ez   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. 2012 tax form 1040ez The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. 2012 tax form 1040ez You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). 2012 tax form 1040ez Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). 2012 tax form 1040ez A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. 2012 tax form 1040ez You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. 2012 tax form 1040ez Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. 2012 tax form 1040ez See Real Estate Professional under Activities That Are Not Passive Activities, later. 2012 tax form 1040ez An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. 2012 tax form 1040ez It does not matter whether the use is under a lease, a service contract, or some other arrangement. 2012 tax form 1040ez Exceptions. 2012 tax form 1040ez   Your activity is not a rental activity if any of the following apply. 2012 tax form 1040ez The average period of customer use of the property is 7 days or less. 2012 tax form 1040ez You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. 2012 tax form 1040ez If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. 2012 tax form 1040ez The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. 2012 tax form 1040ez The activity's average period of customer use will equal the sum of the amounts for each class. 2012 tax form 1040ez The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. 2012 tax form 1040ez Significant personal services include only services performed by individuals. 2012 tax form 1040ez To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. 2012 tax form 1040ez Significant personal services do not include the following. 2012 tax form 1040ez Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. 2012 tax form 1040ez You provide extraordinary personal services in making the rental property available for customer use. 2012 tax form 1040ez Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. 2012 tax form 1040ez The rental is incidental to a nonrental activity. 2012 tax form 1040ez The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. 2012 tax form 1040ez The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. 2012 tax form 1040ez The rental of property is incidental to a trade or business activity if all of the following apply. 2012 tax form 1040ez You own an interest in the trade or business activity during the year. 2012 tax form 1040ez The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. 2012 tax form 1040ez Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. 2012 tax form 1040ez Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. 2012 tax form 1040ez You customarily make the rental property available during defined business hours for nonexclusive use by various customers. 2012 tax form 1040ez You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. 2012 tax form 1040ez    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. 2012 tax form 1040ez Special $25,000 allowance. 2012 tax form 1040ez   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. 2012 tax form 1040ez This special allowance is an exception to the general rule disallowing the passive activity loss. 2012 tax form 1040ez Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. 2012 tax form 1040ez   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. 2012 tax form 1040ez If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. 2012 tax form 1040ez   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. 2012 tax form 1040ez See Phaseout rule , later. 2012 tax form 1040ez Example. 2012 tax form 1040ez Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. 2012 tax form 1040ez She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. 2012 tax form 1040ez She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). 2012 tax form 1040ez Commercial revitalization deduction (CRD). 2012 tax form 1040ez   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. 2012 tax form 1040ez Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. 2012 tax form 1040ez You cannot claim a CRD for a building placed in service after December 31, 2009. 2012 tax form 1040ez Active participation. 2012 tax form 1040ez   Active participation is not the same as material participation (defined later). 2012 tax form 1040ez Active participation is a less stringent standard than material participation. 2012 tax form 1040ez For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. 2012 tax form 1040ez Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. 2012 tax form 1040ez   Only individuals can actively participate in rental real estate activities. 2012 tax form 1040ez However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. 2012 tax form 1040ez   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. 2012 tax form 1040ez The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. 2012 tax form 1040ez   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). 2012 tax form 1040ez   Limited partners are not treated as actively participating in a partnership's rental real estate activities. 2012 tax form 1040ez   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. 2012 tax form 1040ez   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. 2012 tax form 1040ez Example. 2012 tax form 1040ez Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. 2012 tax form 1040ez He advertised and rented the house to the current tenant himself. 2012 tax form 1040ez He also collected the rents and did the repairs or hired someone to do them. 2012 tax form 1040ez Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. 2012 tax form 1040ez Phaseout rule. 2012 tax form 1040ez   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). 2012 tax form 1040ez If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. 2012 tax form 1040ez    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. 2012 tax form 1040ez Taxable social security and tier 1 railroad retirement benefits. 2012 tax form 1040ez Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. 2012 tax form 1040ez The exclusion from income of interest from qualified U. 2012 tax form 1040ez S. 2012 tax form 1040ez savings bonds used to pay qualified higher education expenses. 2012 tax form 1040ez The exclusion from income of amounts received from an employer's adoption assistance program. 2012 tax form 1040ez Passive activity income or loss included on Form 8582. 2012 tax form 1040ez Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). 2012 tax form 1040ez Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). 2012 tax form 1040ez The deduction for the employer-equivalent portion of self-employment tax. 2012 tax form 1040ez The deduction for domestic production activities. 2012 tax form 1040ez The deduction allowed for interest on student loans. 2012 tax form 1040ez The deduction for qualified tuition and related expenses. 2012 tax form 1040ez Example. 2012 tax form 1040ez During 2013, John was unmarried and was not a real estate professional. 2012 tax form 1040ez For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. 2012 tax form 1040ez His modified adjusted gross income is $120,000. 2012 tax form 1040ez When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. 2012 tax form 1040ez He must carry over the remaining $16,000 passive activity loss to 2014. 2012 tax form 1040ez He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. 2012 tax form 1040ez   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. 2012 tax form 1040ez For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). 2012 tax form 1040ez   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. 2012 tax form 1040ez Ordering rules. 2012 tax form 1040ez   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. 2012 tax form 1040ez The portion of passive activity losses not attributable to the CRD. 2012 tax form 1040ez The portion of passive activity losses attributable to the CRD. 2012 tax form 1040ez The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. 2012 tax form 1040ez The portion of passive activity credits attributable to the rehabilitation credit. 2012 tax form 1040ez The portion of passive activity credits attributable to the low-income housing credit. 2012 tax form 1040ez Activities That Are Not Passive Activities The following are not passive activities. 2012 tax form 1040ez Trade or business activities in which you materially participated for the tax year. 2012 tax form 1040ez A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). 2012 tax form 1040ez It does not matter whether you materially participated in the activity for the tax year. 2012 tax form 1040ez However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. 2012 tax form 1040ez  See Temporary Regulations section 1. 2012 tax form 1040ez 469-1T(e)(4)(ii). 2012 tax form 1040ez The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. 2012 tax form 1040ez An activity of trading personal property for the account of those who own interests in the activity. 2012 tax form 1040ez See Temporary Regulations section 1. 2012 tax form 1040ez 469-1T(e)(6). 2012 tax form 1040ez Rental real estate activities in which you materially participated as a real estate professional. 2012 tax form 1040ez See Real Estate Professional , later. 2012 tax form 1040ez You should not enter income and losses from these activities on Form 8582. 2012 tax form 1040ez Instead, enter them on the forms or schedules you would normally use. 2012 tax form 1040ez Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. 2012 tax form 1040ez Material participation tests. 2012 tax form 1040ez    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. 2012 tax form 1040ez You participated in the activity for more than 500 hours. 2012 tax form 1040ez Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. 2012 tax form 1040ez You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. 2012 tax form 1040ez The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. 2012 tax form 1040ez A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. 2012 tax form 1040ez See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. 2012 tax form 1040ez You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. 2012 tax form 1040ez The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. 2012 tax form 1040ez An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. 2012 tax form 1040ez Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. 2012 tax form 1040ez   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. 2012 tax form 1040ez Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). 2012 tax form 1040ez Participation. 2012 tax form 1040ez   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. 2012 tax form 1040ez Work not usually performed by owners. 2012 tax form 1040ez   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. 2012 tax form 1040ez The work is not work that is customarily done by the owner of that type of activity. 2012 tax form 1040ez One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. 2012 tax form 1040ez Participation as an investor. 2012 tax form 1040ez   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. 2012 tax form 1040ez Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. 2012 tax form 1040ez Spouse's participation. 2012 tax form 1040ez   Your participation in an activity includes your spouse's participation. 2012 tax form 1040ez This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. 2012 tax form 1040ez Proof of participation. 2012 tax form 1040ez You can use any reasonable method to prove your participation in an activity for the year. 2012 tax form 1040ez You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. 2012 tax form 1040ez For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. 2012 tax form 1040ez Limited partners. 2012 tax form 1040ez   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. 2012 tax form 1040ez However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. 2012 tax form 1040ez   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). 2012 tax form 1040ez Retired or disabled farmer and surviving spouse of a farmer. 2012 tax form 1040ez   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. 2012 tax form 1040ez Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. 2012 tax form 1040ez Corporations. 2012 tax form 1040ez   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. 2012 tax form 1040ez   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. 2012 tax form 1040ez See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. 2012 tax form 1040ez Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. 2012 tax form 1040ez However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. 2012 tax form 1040ez For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. 2012 tax form 1040ez See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. 2012 tax form 1040ez If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). 2012 tax form 1040ez If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. 2012 tax form 1040ez Qualifications. 2012 tax form 1040ez   You qualified as a real estate professional for the year if you met both of the following requirements. 2012 tax form 1040ez More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. 2012 tax form 1040ez You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. 2012 tax form 1040ez   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. 2012 tax form 1040ez You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. 2012 tax form 1040ez   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. 2012 tax form 1040ez However, you can count your spouse's participation in an activity in determining if you materially participated. 2012 tax form 1040ez Real property trades or businesses. 2012 tax form 1040ez   A real property trade or business is a trade or business that does any of the following with real property. 2012 tax form 1040ez Develops or redevelops it. 2012 tax form 1040ez Constructs or reconstructs it. 2012 tax form 1040ez Acquires it. 2012 tax form 1040ez Converts it. 2012 tax form 1040ez Rents or leases it. 2012 tax form 1040ez Operates or manages it. 2012 tax form 1040ez Brokers it. 2012 tax form 1040ez Closely held corporations. 2012 tax form 1040ez   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. 2012 tax form 1040ez Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. 2012 tax form 1040ez Self-charged interest. 2012 tax form 1040ez   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. 2012 tax form 1040ez   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. 2012 tax form 1040ez This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. 2012 tax form 1040ez   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. 2012 tax form 1040ez    Exception. 2012 tax form 1040ez The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. 2012 tax form 1040ez 469-7(g) to avoid the application of these rules. 2012 tax form 1040ez For more details on the self-charged interest rules, see Regulations section 1. 2012 tax form 1040ez 469-7. 2012 tax form 1040ez Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. 2012 tax form 1040ez Passive activity income does not include the following items. 2012 tax form 1040ez Income from an activity that is not a passive activity. 2012 tax form 1040ez These activities are discussed under Activities That Are Not Passive Activities , earlier. 2012 tax form 1040ez Portfolio income. 2012 tax form 1040ez This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. 2012 tax form 1040ez It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. 2012 tax form 1040ez The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. 2012 tax form 1040ez For more information on self-charged interest, see Self-charged interest , earlier. 2012 tax form 1040ez Personal service income. 2012 tax form 1040ez This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. 2012 tax form 1040ez Income from positive section 481 adjustments allocated to activities other than passive activities. 2012 tax form 1040ez (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. 2012 tax form 1040ez ) Income or gain from investments of working capital. 2012 tax form 1040ez Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. 2012 tax form 1040ez This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. 2012 tax form 1040ez Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. 2012 tax form 1040ez Any other income that must be treated as nonpassive income. 2012 tax form 1040ez See Recharacterization of Passive Income , later. 2012 tax form 1040ez Overall gain from any interest in a publicly traded partnership. 2012 tax form 1040ez See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. 2012 tax form 1040ez State, local, and foreign income tax refunds. 2012 tax form 1040ez Income from a covenant not to compete. 2012 tax form 1040ez Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. 2012 tax form 1040ez Alaska Permanent Fund dividends. 2012 tax form 1040ez Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. 2012 tax form 1040ez See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. 2012 tax form 1040ez Disposition of property interests. 2012 tax form 1040ez   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. 2012 tax form 1040ez The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. 2012 tax form 1040ez An exception to this general rule may apply if you previously used the property in a different activity. 2012 tax form 1040ez Exception for more than one use in the preceding 12 months. 2012 tax form 1040ez   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. 2012 tax form 1040ez Any gain allocated to a passive activity is passive activity income. 2012 tax form 1040ez   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. 2012 tax form 1040ez Exception for substantially appreciated property. 2012 tax form 1040ez   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. 2012 tax form 1040ez You used the property in a passive activity for 20% of the time you held your interest in the property. 2012 tax form 1040ez You used the property in a passive activity for the entire 24-month period before its disposition. 2012 tax form 1040ez If neither condition applies, the gain is not passive activity income. 2012 tax form 1040ez However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. 2012 tax form 1040ez   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. 2012 tax form 1040ez Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. 2012 tax form 1040ez   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. 2012 tax form 1040ez Disposition of property converted to inventory. 2012 tax form 1040ez   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. 2012 tax form 1040ez Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. 2012 tax form 1040ez This rule applies only if you meet all of the following conditions. 2012 tax form 1040ez At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). 2012 tax form 1040ez Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. 2012 tax form 1040ez You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. 2012 tax form 1040ez Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. 2012 tax form 1040ez For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. 2012 tax form 1040ez See Coordination with other limitations on deductions that apply before the passive activity rules , later. 2012 tax form 1040ez Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. 2012 tax form 1040ez Exceptions. 2012 tax form 1040ez   Passive activity deductions do not include the following items. 2012 tax form 1040ez Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. 2012 tax form 1040ez Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. 2012 tax form 1040ez For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. 2012 tax form 1040ez Losses from dispositions of property that produce portfolio income or property held for investment. 2012 tax form 1040ez State, local, and foreign income taxes. 2012 tax form 1040ez Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. 2012 tax form 1040ez Charitable contribution deductions. 2012 tax form 1040ez Net operating loss deductions. 2012 tax form 1040ez Percentage depletion carryovers for oil and gas wells. 2012 tax form 1040ez Capital loss carrybacks and carryovers. 2012 tax form 1040ez Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. 2012 tax form 1040ez See Coordination with other limitations on deductions that apply before the passive activity rules , later. 2012 tax form 1040ez Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. 2012 tax form 1040ez Net negative section 481 adjustments allocated to activities other than passive activities. 2012 tax form 1040ez (Section 481 adjustments are adjustments required due to changes in accounting methods. 2012 tax form 1040ez ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. 2012 tax form 1040ez The deduction for the employer-equivalent portion of self-employment tax. 2012 tax form 1040ez Coordination with other limitations on deductions that apply before the passive activity rules. 2012 tax form 1040ez   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. 2012 tax form 1040ez The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. 2012 tax form 1040ez Proration of deductions disallowed under basis limitations. 2012 tax form 1040ez   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. 2012 tax form 1040ez For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. 2012 tax form 1040ez   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. 2012 tax form 1040ez For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. 2012 tax form 1040ez Proration of deductions disallowed under at-risk limitation. 2012 tax form 1040ez   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. 2012 tax form 1040ez For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. 2012 tax form 1040ez Coordination of basis and at-risk limitations. 2012 tax form 1040ez   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. 2012 tax form 1040ez Separately identified items of deduction and loss. 2012 tax form 1040ez   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. 2012 tax form 1040ez   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. 2012 tax form 1040ez See Grouping Your Activities , later. 2012 tax form 1040ez Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). 2012 tax form 1040ez See Section 1231 Gains and Losses in Publication 544 for more information. 2012 tax form 1040ez Are attributable to pre-enactment interests in activities. 2012 tax form 1040ez See Regulations section 1. 2012 tax form 1040ez 469-11T(c). 2012 tax form 1040ez Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. 2012 tax form 1040ez Grouping is important for a number of reasons. 2012 tax form 1040ez If you group two activities into one larger activity, you need only show material participation in the activity as a whole. 2012 tax form 1040ez But if the two activities are separate, you must show material participation in each one. 2012 tax form 1040ez On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. 2012 tax form 1040ez But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. 2012 tax form 1040ez Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. 2012 tax form 1040ez Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. 2012 tax form 1040ez You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. 2012 tax form 1040ez The following factors have the greatest weight in determining whether activities form an appropriate economic unit. 2012 tax form 1040ez All of the factors do not have to apply to treat more than one activity as a single activity. 2012 tax form 1040ez The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. 2012 tax form 1040ez Example 1. 2012 tax form 1040ez John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. 2012 tax form 1040ez Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. 2012 tax form 1040ez For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. 2012 tax form 1040ez Example 2. 2012 tax form 1040ez Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. 2012 tax form 1040ez Betty is also a partner in DEF (a trucking business). 2012 tax form 1040ez ABC and DEF are under common control. 2012 tax form 1040ez The main part of DEF's business is transporting goods for ABC. 2012 tax form 1040ez DEF is the only trucking business in which Betty is involved. 2012 tax form 1040ez Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. 2012 tax form 1040ez Consistency and disclosure requirement. 2012 tax form 1040ez   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. 2012 tax form 1040ez You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. 2012 tax form 1040ez   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. 2012 tax form 1040ez   See Disclosure Requirement , later. 2012 tax form 1040ez Regrouping by the IRS. 2012 tax form 1040ez   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. 2012 tax form 1040ez Rental activities. 2012 tax form 1040ez   In general, you cannot group a rental activity with a trade or business activity. 2012 tax form 1040ez However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. 2012 tax form 1040ez Example. 2012 tax form 1040ez Herbert and Wilma are married and file a joint return. 2012 tax form 1040ez Healthy Food, an S corporation, is a grocery store business. 2012 tax form 1040ez Herbert is Healthy Food's only shareholder. 2012 tax form 1040ez Plum Tower, an S corporation, owns and rents out the building. 2012 tax form 1040ez Wilma is Plum Tower's only shareholder. 2012 tax form 1040ez Plum Tower rents part of its building to Healthy Food. 2012 tax form 1040ez Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. 2012 tax form 1040ez Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. 2012 tax form 1040ez The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). 2012 tax form 1040ez If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. 2012 tax form 1040ez Grouping of real and personal property rentals. 2012 tax form 1040ez   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. 2012 tax form 1040ez However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. 2012 tax form 1040ez Certain activities may not be grouped. 2012 tax form 1040ez   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. 2012 tax form 1040ez Holding, producing, or distributing motion picture films or video tapes. 2012 tax form 1040ez Farming. 2012 tax form 1040ez Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). 2012 tax form 1040ez For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. 2012 tax form 1040ez Exploring for, or exploiting, oil and gas resources. 2012 tax form 1040ez Exploring for, or exploiting, geothermal deposits. 2012 tax form 1040ez   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. 2012 tax form 1040ez Limited entrepreneur. 2012 tax form 1040ez   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. 2012 tax form 1040ez Activities conducted through another entity. 2012 tax form 1040ez   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. 2012 tax form 1040ez Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. 2012 tax form 1040ez    You may not treat activities grouped together by the entity as separate activities. 2012 tax form 1040ez Personal service and closely held corporations. 2012 tax form 1040ez   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. 2012 tax form 1040ez See Material Participation , earlier, and Significant Participation Passive Activities , later. 2012 tax form 1040ez Publicly traded partnership (PTP). 2012 tax form 1040ez   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. 2012 tax form 1040ez Partial dispositions. 2012 tax form 1040ez   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. 2012 tax form 1040ez However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. 2012 tax form 1040ez Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. 2012 tax form 1040ez You are required to report certain changes to your groupings that occur during the tax year to the IRS. 2012 tax form 1040ez If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. 2012 tax form 1040ez You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. 2012 tax form 1040ez If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. 2012 tax form 1040ez New grouping. 2012 tax form 1040ez   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. 2012 tax form 1040ez The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. 2012 tax form 1040ez In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. 2012 tax form 1040ez Addition to an existing grouping. 2012 tax form 1040ez   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. 2012 tax form 1040ez The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. 2012 tax form 1040ez In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. 2012 tax form 1040ez Regrouping. 2012 tax form 1040ez   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. 2012 tax form 1040ez The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. 2012 tax form 1040ez If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. 2012 tax form 1040ez In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. 2012 tax form 1040ez Groupings by partnerships and S corporations. 2012 tax form 1040ez   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. 2012 tax form 1040ez Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. 2012 tax form 1040ez S. 2012 tax form 1040ez Return of Partnership Income, or Form 1120S, U. 2012 tax form 1040ez S. 2012 tax form 1040ez Income Tax Return for an S Corporation, whichever is applicable. 2012 tax form 1040ez   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. 2012 tax form 1040ez   A partner or shareholder may not treat activities grouped together by the entity as separate activities. 2012 tax form 1040ez Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. 2012 tax form 1040ez Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. 2012 tax form 1040ez If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. 2012 tax form 1040ez If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). 2012 tax form 1040ez If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. 2012 tax form 1040ez Instead, enter income or losses on the form and schedules you normally use. 2012 tax form 1040ez However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. 2012 tax form 1040ez Limit on recharacterized passive income. 2012 tax form 1040ez   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. 2012 tax form 1040ez Investment income and investment expense. 2012 tax form 1040ez   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. 2012 tax form 1040ez Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. 2012 tax form 1040ez If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. 2012 tax form 1040ez Corporations. 2012 tax form 1040ez   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. 2012 tax form 1040ez The corporation is not treated as materially participating in the activity for the year. 2012 tax form 1040ez One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. 2012 tax form 1040ez Worksheet A. 2012 tax form 1040ez   Complete Worksheet A. 2012 tax form 1040ez Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. 2012 tax form 1040ez Begin by entering the name of each activity in the left column. 2012 tax form 1040ez Column (a). 2012 tax form 1040ez   Enter the number of hours you participated in each activity and total the column. 2012 tax form 1040ez   If the total is more than 500, do not complete Worksheet A or B. 2012 tax form 1040ez None of the activities are passive activities because you satisfy test 4 for material participation. 2012 tax form 1040ez (See Material participation tests , earlier. 2012 tax form 1040ez ) Report all the income and losses from these activities on the forms and schedules you normally use. 2012 tax form 1040ez Do not include the income and losses on Form 8582. 2012 tax form 1040ez Column (b). 2012 tax form 1040ez   Enter the net loss, if any, from the activity. 2012 tax form 1040ez Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). 2012 tax form 1040ez Enter -0- here if the prior year unallowed loss is the same as the current year net income. 2012 tax form 1040ez Column (c). 2012 tax form 1040ez   Enter net income (if any) from the activity. 2012 tax form 1040ez Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. 2012 tax form 1040ez Column (d). 2012 tax form 1040ez   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). 2012 tax form 1040ez If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. 2012 tax form 1040ez Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88
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Life Cycle of an Exempt Organization

Organizations that meet the requirements of Internal Revenue Code section 501(a) are exempt from federal income taxation. In addition, charitable contributions made to some section 501(a) organizations by individuals and corporations are deductible under Code section 170.

This website provides information about points of intersection between organizations and the IRS. The content includes explanatory information, and links to forms that an organization may need to file with the IRS. The materials cover five stages in an organization's life cycle:

  1. Starting Out: Creating an organization under state law, acquiring an employer identification number, and identifying the appropriate federal tax classification.
  2. Applying for Exemption:  Acquiring, completing, and submitting application forms; how the IRS processes applications; and getting help from the IRS during the application process.
  3. Required Filings:  Annual exempt organization returns, unrelated business income tax filings, and other returns and reports that an organization may have to file.
  4. Ongoing Compliance:  How an organization can avoid jeopardizing its tax-exempt status, disclosure requirements, employment taxes, and other ongoing compliance issues.
  5. Significant Events:  Audits, private letter rulings, and termination procedures.

Life Cycle pages are available for the following types of organizations:

 

Page Last Reviewed or Updated: 19-Nov-2013

The 2012 Tax Form 1040ez

2012 tax form 1040ez Publication 4492-B - Main Content Table of Contents DefinitionsMidwestern Disaster Areas Applicable Disaster Date Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Casualty and Theft LossesTime limit for making election. 2012 tax form 1040ez Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesEmployee Retention Credit Employer Housing Credit and Exclusion Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). 2012 tax form 1040ez Definitions The following definitions are used throughout this publication. 2012 tax form 1040ez Midwestern Disaster Areas A Midwestern disaster area is an area for which a major disaster was declared by the President during the period beginning on May 20, 2008, and ending on July 31, 2008, in the state of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, or Wisconsin, as a result of severe storms, tornadoes, or flooding that occurred on the applicable disaster date. 2012 tax form 1040ez See Tables 1 and 2 for a list of the counties included in the Midwestern disaster areas. 2012 tax form 1040ez Applicable Disaster Date The term “applicable disaster date” as used in this publication, refers to the date on which the severe storms, tornadoes, or flooding occurred in the Midwestern disaster areas. 2012 tax form 1040ez You will need to know this date when using this publication for the various tax provisions. 2012 tax form 1040ez Table 1 The counties listed in Table 1 below are eligible for all tax provisions shown in this publication. 2012 tax form 1040ez Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 05/02/2008through05/12/2008 Arkansas Arkansas, Benton, Cleburne, Conway, Crittenden, Grant, Lonoke, Mississippi, Phillips, Pulaski, Saline, and Van Buren. 2012 tax form 1040ez 06/01/2008through07/22/2008 Illinois Adams, Calhoun, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Jersey, Lake, Lawrence, Mercer, Rock Island, Whiteside, and Winnebago. 2012 tax form 1040ez 05/30/2008through06/27/2008 Indiana Adams, Bartholomew, Brown, Clay, Daviess, Dearborn, Decatur, Gibson, Grant, Greene, Hamilton, Hancock, Hendricks, Henry, Huntington, Jackson, Jefferson, Jennings, Johnson, Knox, Lawrence, Madison, Marion, Monroe, Morgan, Owen, Parke, Pike, Posey, Putnam, Randolph, Ripley, Rush, Shelby, Sullivan, Tippecanoe, Vermillion, Vigo, Washington, and Wayne. 2012 tax form 1040ez 05/25/2008through08/13/2008 Iowa Adair, Adams, Allamakee, Appanoose, Audubon, Benton, Black Hawk, Boone, Bremer, Buchanan, Butler, Cass, Cedar, Cerro Gordo, Chickasaw, Clarke, Clayton, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dubuque, Fayette, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Howard, Humboldt, Iowa, Jackson, Jasper, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, Page, Polk, Pottawattamie, Poweshiek, Ringgold, Scott, Story, Tama, Union, Van Buren, Wapello, Warren, Washington, Webster, Winnebago, Winneshiek, Worth, and Wright. 2012 tax form 1040ez 05/10/2008through05/11/2008 Missouri Barry, Jasper, and Newton. 2012 tax form 1040ez 06/01/2008through08/13/2008 Missouri Adair, Andrew, Callaway, Cass, Chariton, Clark, Gentry, Greene, Harrison, Holt, Johnson, Lewis, Lincoln, Linn, Livingston, Macon, Marion, Monroe, Nodaway, Pike, Putnam, Ralls, St. 2012 tax form 1040ez Charles, Stone, Taney, Vernon, and Webster. 2012 tax form 1040ez 05/22/2008through06/24/2008 Nebraska Buffalo, Butler, Colfax, Custer, Dawson, Douglas, Gage, Hamilton, Holt, Jefferson, Kearney, Lancaster, Platte, Richardson, Sarpy, and Saunders. 2012 tax form 1040ez 06/05/2008through07/25/2008 Wisconsin Adams, Calumet, Crawford, Columbia, Dane, Dodge, Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Juneau, Kenosha, La Crosse, Manitowoc, Marquette, Milwaukee, Monroe, Ozaukee, Racine, Richland, Rock, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha, and Winnebago. 2012 tax form 1040ez *For more details, go to www. 2012 tax form 1040ez fema. 2012 tax form 1040ez gov Table 2 The counties listed in Table 2 below are eligible for all of the special tax provisions shown in this publication except the following. 2012 tax form 1040ez Charitable Giving Incentives. 2012 tax form 1040ez Net Operating Losses. 2012 tax form 1040ez Education Credits. 2012 tax form 1040ez Recapture of Federal Mortgage Subsidy. 2012 tax form 1040ez Tax Relief for Temporary Relocation. 2012 tax form 1040ez Employee Retention Credit. 2012 tax form 1040ez Employer Housing Credit and Exclusion. 2012 tax form 1040ez Demolition and Clean-up Costs. 2012 tax form 1040ez Increase in Rehabilitation Credit. 2012 tax form 1040ez Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 06/01/2008through07/22/2008 Illinois Greene, Madison, Monroe, Pike, Randolph, St. 2012 tax form 1040ez Clair, and Scott. 2012 tax form 1040ez 05/30/2008through06/27/2008 Indiana Benton, Boone, Fountain, Franklin, Jay, Montgomery, Ohio, Switzerland, Union, and Wabash. 2012 tax form 1040ez 05/25/2008through08/13/2008 Iowa Carroll, Cherokee, Lyon, Palo Alto, Pocahontas, Taylor, and Wayne. 2012 tax form 1040ez 05/22/2008through06/16/2008 Kansas Barber, Barton, Bourbon, Brown, Butler, Chautauqua, Cherokee, Clark, Clay, Comanche, Cowley, Crawford, Decatur, Dickinson, Edwards, Elk, Ellis, Ellsworth, Franklin, Gove, Graham, Harper, Haskell, Hodgeman, Jackson, Jewell, Kingman, Kiowa, Lane, Linn, Logan, Mitchell, Montgomery, Ness, Norton, Osborne, Pawnee, Phillips, Pratt, Reno, Republic, Riley, Rooks, Rush, Saline, Seward, Sheridan, Smith, Stafford, Sumner, Thomas, Trego, Wallace, and Wilson. 2012 tax form 1040ez 06/06/2008through06/13/2008 Michigan Allegan, Barry, Eaton, Ingham, Lake, Manistee, Mason, Missaukee, Osceola, Ottawa, Saginaw, and Wexford. 2012 tax form 1040ez 06/06/2008through06/12/2008 Minnesota Cook, Fillmore, Freeborn, Houston, Mower, and Nobles. 2012 tax form 1040ez 06/01/2008through08/13/2008 Missouri Atchison, Audrain, Bates, Buchanan, Cape Girardeau, Carroll, Christian, Daviess, Grundy, Howard, Jefferson, Knox, Mercer, Miller, Mississippi, Morgan, New Madrid, Pemiscot, Perry, Pettis, Platte, Polk, Randolph, Ray, Saline, Schuyler, Scotland, Shelby, St. 2012 tax form 1040ez Genevieve, St. 2012 tax form 1040ez Louis, the Independent City of St. 2012 tax form 1040ez Louis, Scott, Sullivan, and Worth. 2012 tax form 1040ez 04/23/2008through04/26/2008 Nebraska Gage, Johnson, Morrill, Nemaha, and Pawnee. 2012 tax form 1040ez 05/22/2008through06/24/2008 Nebraska Adams, Blaine, Boone, Boyd, Brown, Burt, Cass, Chase, Cherry, Cuming, Dundy, Fillmore, Frontier, Furnas, Garfield, Gosper, Greeley, Hall, Hayes, Howard, Johnson, Keya Paha, Lincoln, Logan, Loup, Merrick, McPherson, Morrill, Nance, Nemaha, Otoe, Phelps, Polk, Red Willow, Rock, Saline, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Webster, Wheeler, and York. 2012 tax form 1040ez 06/27/2008 Nebraska Dodge, Douglas, Sarpy, and Saunders. 2012 tax form 1040ez 06/05/2008through07/25/2008 Wisconsin Lafayette. 2012 tax form 1040ez * For more details, go to www. 2012 tax form 1040ez fema. 2012 tax form 1040ez gov Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions This benefit applies only to the counties in Table 1. 2012 tax form 1040ez Individuals. 2012 tax form 1040ez   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% of adjusted gross income (AGI) limit. 2012 tax form 1040ez A qualified contribution is a charitable contribution paid in cash or by check to a 50% limit organization if you make an election to have the 50% limit not apply to these contributions. 2012 tax form 1040ez   A qualified contribution must also meet all of the following requirements. 2012 tax form 1040ez Be paid after May 1, 2008, and before January 1, 2009. 2012 tax form 1040ez The contribution must be for relief efforts in one or more Midwestern disaster areas. 2012 tax form 1040ez Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. 2012 tax form 1040ez   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. 2012 tax form 1040ez You can carry over any contributions you are not able to deduct for 2008 because of this limit. 2012 tax form 1040ez In 2009, the carryover of your unused qualified contributions is subject to the 50% of AGI limit. 2012 tax form 1040ez Exception. 2012 tax form 1040ez   Qualified contributions do not include contributions to certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund. 2012 tax form 1040ez Corporations. 2012 tax form 1040ez   A corporation can elect to deduct qualified cash contributions without regard to the 10% of taxable income limit if the contributions were paid after May 1, 2008, and before January 1, 2009, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund), for relief efforts in one or more Midwestern disaster areas. 2012 tax form 1040ez Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. 2012 tax form 1040ez The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. 2012 tax form 1040ez Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% of taxable income limit. 2012 tax form 1040ez Partners and shareholders. 2012 tax form 1040ez   Each partner in a partnership and each shareholder in an S corporation must make a separate election to have the appropriate limit not apply. 2012 tax form 1040ez More information. 2012 tax form 1040ez   For more information, see Publication 526 or Publication 542, Corporations. 2012 tax form 1040ez Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. 2012 tax form 1040ez Standard Mileage Rate for Charitable Use of Vehicles This benefit applies only to the counties in Table 1. 2012 tax form 1040ez The following are special standard mileage rates in effect for 2008 for the cost of operating your vehicle for providing charitable services related only to the severe storms, tornadoes, or flooding. 2012 tax form 1040ez 36 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. 2012 tax form 1040ez 41 cents per mile for the period July 1 through December 31, 2008. 2012 tax form 1040ez Mileage Reimbursements to Charitable Volunteers This benefit applies only to the counties in Table 1. 2012 tax form 1040ez You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger vehicle for the benefit of a qualified charitable organization in providing relief related to the severe storms, tornadoes, or flooding during the period beginning on the applicable disaster date, and ending on December 31, 2008. 2012 tax form 1040ez You cannot claim a deduction or credit for amounts you exclude. 2012 tax form 1040ez You must keep records of miles driven, time, place (or use), and purpose of the mileage. 2012 tax form 1040ez The amount you can exclude cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. 2012 tax form 1040ez 50. 2012 tax form 1040ez 5 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. 2012 tax form 1040ez 58. 2012 tax form 1040ez 5 cents per mile for the period July 1 through December 31, 2008. 2012 tax form 1040ez Casualty and Theft Losses This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez The following paragraphs explain changes to casualty and theft losses that were caused by the severe storms, tornadoes, or flooding in the Midwestern disaster areas. 2012 tax form 1040ez For more information, see Publication 547. 2012 tax form 1040ez Limits on personal casualty or theft losses. 2012 tax form 1040ez   Losses of personal use property that arose in a Midwestern disaster area on or after the applicable disaster date are not subject to the $100 or 10% of AGI limits. 2012 tax form 1040ez Qualifying losses include losses from casualties and thefts that arose in a Midwestern disaster area that were attributable to the severe storms, tornadoes, or flooding. 2012 tax form 1040ez When completing Form 4684, do not include on line 17 any losses that arose in a Midwestern disaster area. 2012 tax form 1040ez A loss arising in a Midwestern disaster area is not considered a loss attributable to a federally declared disaster for purposes of that line and cannot be added to your standard deduction. 2012 tax form 1040ez When to deduct the loss. 2012 tax form 1040ez   Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. 2012 tax form 1040ez However, you can elect to deduct losses caused by the severe storms, tornadoes, or flooding on your return for the prior year. 2012 tax form 1040ez Special instructions for individuals who elect to claim a Midwestern disaster area casualty or theft loss for 2007. 2012 tax form 1040ez   Individuals filing or amending their 2007 tax return for casualty or theft losses that were attributable to the severe storms, tornadoes, or flooding should: Enter “Midwestern Disaster Area” at the top of Form 1040 or Form 1040X, and Complete the 2008 version of Form 4684. 2012 tax form 1040ez Cross out “2008” and enter “2007” at the top of Form 4684. 2012 tax form 1040ez Time limit for making election. 2012 tax form 1040ez   You must make this election to claim your casualty or theft loss in 2007 by the later of the following dates. 2012 tax form 1040ez The due date (without extensions) for filing your 2008 income tax return. 2012 tax form 1040ez The due date (with extensions) for filing your 2007 income tax return. 2012 tax form 1040ez Example. 2012 tax form 1040ez If you are a calendar year individual taxpayer, you have until April 15, 2009, to amend your 2007 tax return to claim a casualty or theft loss that occurred during 2008. 2012 tax form 1040ez Replacement Period for Nonrecognition of Gain This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. 2012 tax form 1040ez Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a federally declared disaster area). 2012 tax form 1040ez However, for property that was involuntarily converted on or after the applicable disaster date, as a result of the severe storms, tornadoes, or flooding, a 5-year replacement period applies if substantially all of the use of the replacement property is in a Midwestern disaster area. 2012 tax form 1040ez For more information, see the Instructions for Form 4684. 2012 tax form 1040ez Net Operating Losses This benefit applies only to the counties in Table 1. 2012 tax form 1040ez Qualified disaster recovery assistance loss. 2012 tax form 1040ez   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. 2012 tax form 1040ez However, the portion of an NOL that is a qualified disaster recovery assistance loss can be carried back to the 5 tax years before the NOL year. 2012 tax form 1040ez In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. 2012 tax form 1040ez   A qualified disaster recovery assistance loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified disaster recovery assistance casualty loss (as defined below), Moving expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the employment of an individual whose main home was in a Midwestern disaster area before the applicable disaster date, who was unable to remain in that home because of the severe storms, tornadoes, or flooding, and whose main job location (after the move) is in a Midwestern disaster area, Temporary housing expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, to house employees of the taxpayer whose main job location is in a Midwestern disaster area, Depreciation or amortization allowable for any qualified disaster recovery assistance property (even if you elected not to claim the special disaster recovery assistance depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred on or after the applicable disaster date, and before January 1, 2011, for any damage from the severe storms, tornadoes, or flooding to property located in a Midwestern disaster area. 2012 tax form 1040ez Qualified disaster recovery assistance casualty loss. 2012 tax form 1040ez   A qualified disaster recovery assistance casualty loss is any deductible section 1231 loss of property located in a Midwestern disaster area if the loss was caused by the severe storms, tornadoes, or flooding. 2012 tax form 1040ez For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the severe storms, tornadoes, or flooding of property located in a Midwestern disaster area. 2012 tax form 1040ez Any such loss taken into account in figuring your qualified disaster recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year. 2012 tax form 1040ez More information. 2012 tax form 1040ez   For more information on NOLs, see Publication 536 or Publication 542, Corporations. 2012 tax form 1040ez IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Definitions Qualified disaster recovery assistance distribution. 2012 tax form 1040ez   A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan if all of the following apply. 2012 tax form 1040ez The distribution was made on or after the applicable disaster date and before January 1, 2010. 2012 tax form 1040ez Your main home was located in a Midwestern disaster area on the applicable disaster date. 2012 tax form 1040ez You sustained an economic loss because of the severe storms, tornadoes, or flooding and your main home was in a Midwestern disaster area on the applicable disaster date. 2012 tax form 1040ez Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. 2012 tax form 1040ez   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss. 2012 tax form 1040ez   The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. 2012 tax form 1040ez If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you can allocate the $100,000 limit among the plans any way you choose. 2012 tax form 1040ez   A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution. 2012 tax form 1040ez Eligible retirement plan. 2012 tax form 1040ez   An eligible retirement plan can be any of the following. 2012 tax form 1040ez A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). 2012 tax form 1040ez A qualified annuity plan. 2012 tax form 1040ez A tax-sheltered annuity contract. 2012 tax form 1040ez A governmental section 457 deferred compensation plan. 2012 tax form 1040ez A traditional, SEP, SIMPLE, or Roth IRA. 2012 tax form 1040ez Main home. 2012 tax form 1040ez   Generally, your main home is the home where you live most of the time. 2012 tax form 1040ez A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. 2012 tax form 1040ez Taxation of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. 2012 tax form 1040ez However, if you elect, you can include the entire distribution in your income in the year it was received. 2012 tax form 1040ez Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). 2012 tax form 1040ez However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions. 2012 tax form 1040ez For more information, see Form 8930. 2012 tax form 1040ez Repayment of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. 2012 tax form 1040ez Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. 2012 tax form 1040ez However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay. 2012 tax form 1040ez You have three years from the day after the date you received the distribution to make a repayment. 2012 tax form 1040ez Amounts that are repaid are treated as a qualified rollover and are not included in income. 2012 tax form 1040ez Also, a repayment of a qualified disaster recovery assistance distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. 2012 tax form 1040ez See Form 8930 for more information on how to report repayments. 2012 tax form 1040ez Exceptions. 2012 tax form 1040ez   You cannot repay the following types of distributions. 2012 tax form 1040ez Qualified disaster recovery assistance distributions received as a beneficiary (other than a surviving spouse). 2012 tax form 1040ez Required minimum distributions. 2012 tax form 1040ez Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. 2012 tax form 1040ez Repayment of Qualified Distributions for the Purchase or Construction of a Main Home This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez If you received a qualified distribution to purchase or construct a main home in a Midwestern disaster area, you can repay part or all of that distribution on or after the applicable disaster date, but no later than March 3, 2009, to an eligible retirement plan. 2012 tax form 1040ez For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. 2012 tax form 1040ez To be a qualified distribution, the distribution must meet all of the following requirements. 2012 tax form 1040ez The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. 2012 tax form 1040ez The distribution was received after the date that was 6 months before the day after the applicable disaster date. 2012 tax form 1040ez The distribution was to be used to purchase or construct a main home in a Midwestern disaster area that was not purchased or constructed because of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Amounts that are repaid before March 4, 2009, are treated as a qualified rollover and are not included in income. 2012 tax form 1040ez Also, a repayment of a qualified distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. 2012 tax form 1040ez A qualified distribution not repaid before March 4, 2009, may be taxable for 2007 or 2008 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. 2012 tax form 1040ez You must file Form 8930 if you received a qualified distribution that you repaid, in whole or in part, before March 4, 2009. 2012 tax form 1040ez Loans From Qualified Plans This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez The following benefits are available to qualified individuals. 2012 tax form 1040ez Increases to the limits for distributions treated as loans from employer plans. 2012 tax form 1040ez A 1-year suspension for payments due on plan loans. 2012 tax form 1040ez Qualified individual. 2012 tax form 1040ez   You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. 2012 tax form 1040ez Limits on plan loans. 2012 tax form 1040ez   The $50,000 limit for distributions treated as plan loans is increased to $100,000. 2012 tax form 1040ez In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. 2012 tax form 1040ez If your main home was located in a Midwestern disaster area, the higher limits apply only to loans received during the period beginning on October 3, 2008, and ending on December 31, 2009. 2012 tax form 1040ez One-year suspension of loan payments. 2012 tax form 1040ez   Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for 1 year by the plan administrator. 2012 tax form 1040ez To qualify for the suspension, the due date for any loan payment must occur during the period beginning on the applicable disaster date and ending on December 31, 2009. 2012 tax form 1040ez Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez You can elect to use your 2007 earned income to figure your earned income credit (EIC) and additional child tax credit for 2008 if: Your 2008 earned income is less than your 2007 earned income, and At least one of the following statements is true. 2012 tax form 1040ez Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 1. 2012 tax form 1040ez Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2, and you were displaced from that home because of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Earned income. 2012 tax form 1040ez    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. 2012 tax form 1040ez If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. 2012 tax form 1040ez Joint returns. 2012 tax form 1040ez   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. 2012 tax form 1040ez If you make the election, your 2007 earned income is the sum of your 2007 earned income and your spouse's 2007 earned income. 2012 tax form 1040ez Making the election. 2012 tax form 1040ez   If you make the election to use your 2007 earned income, the election applies for figuring both the EIC and the additional child tax credit. 2012 tax form 1040ez However, you can make the election for the additional child tax credit even if you do not take the EIC. 2012 tax form 1040ez   Electing to use your 2007 earned income can increase or decrease your EIC. 2012 tax form 1040ez Take the following steps to decide whether to make the election. 2012 tax form 1040ez Figure your 2008 EIC using your 2007 earned income. 2012 tax form 1040ez Figure your 2008 additional child tax credit using your 2007 earned income for EIC purposes. 2012 tax form 1040ez Add the results of (1) and (2). 2012 tax form 1040ez Figure your 2008 EIC using your 2008 earned income. 2012 tax form 1040ez Figure your 2008 additional child tax credit using your 2008 earned income for additional child tax credit purposes. 2012 tax form 1040ez Add the results of (4) and (5). 2012 tax form 1040ez Compare the results of (3) and (6). 2012 tax form 1040ez If (3) is larger than (6), it is to your benefit to make the election. 2012 tax form 1040ez If (3) is equal to or smaller than (6), making the election will not help you. 2012 tax form 1040ez   If you elect to use your 2007 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2007 earned income on the dotted line next to line 64a of Form 1040, on the line next to line 40a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. 2012 tax form 1040ez   If you elect to use your 2007 earned income and you are claiming the additional child tax credit, enter your 2007 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. 2012 tax form 1040ez Getting your 2007 tax return information. 2012 tax form 1040ez   If you do not have your 2007 tax records, you can get the amount of earned income used to figure your 2007 EIC by calling 1-866-562-5227. 2012 tax form 1040ez You can also get this information by visiting the IRS website at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov. 2012 tax form 1040ez   If you prefer to figure your 2007 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. 2012 tax form 1040ez See Request for Copy or Transcript of Tax Return on page 11. 2012 tax form 1040ez Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez You can claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by the severe storms, tornadoes, or flooding. 2012 tax form 1040ez The additional exemption amount is claimed on Form 8914. 2012 tax form 1040ez You can claim an additional exemption amount only one time for a specific individual. 2012 tax form 1040ez If you claimed an additional exemption amount for an individual in 2008, you cannot claim that amount again for the same individual in 2009. 2012 tax form 1040ez The maximum additional exemption amount you can claim for all displaced individuals is $2,000. 2012 tax form 1040ez Any additional exemption amount you claimed for displaced individuals in 2008 will reduce the $2,000 maximum for 2009. 2012 tax form 1040ez The $2,000 limit applies to a husband and wife, whether the husband and wife file joint returns or separate returns. 2012 tax form 1040ez If married filing separately, the $2,000 can be divided in $500 increments between the spouses. 2012 tax form 1040ez For example, if one spouse claims an additional exemption amount for one displaced individual, the other spouse, if otherwise eligible, can claim additional exemption amounts for three different displaced individuals. 2012 tax form 1040ez If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. 2012 tax form 1040ez In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). 2012 tax form 1040ez To qualify as a displaced individual, the individual: Must have had his or her main home in a Midwestern disaster area on the applicable disaster date, and he or she must have been displaced from that home. 2012 tax form 1040ez If the individual's main home was located in a Midwestern disaster area as shown in Table 2, that home must have been damaged by the severe storms, tornadoes, or flooding or the individual must have been evacuated from that home because of the severe storms, tornadoes, or flooding, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. 2012 tax form 1040ez You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. 2012 tax form 1040ez You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. 2012 tax form 1040ez Food, clothing, or personal items consumed or used by the displaced individual. 2012 tax form 1040ez Reimbursement for the cost of any long distance telephone calls made by the displaced individual. 2012 tax form 1040ez Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. 2012 tax form 1040ez However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. 2012 tax form 1040ez Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. 2012 tax form 1040ez For more information, see Form 8914. 2012 tax form 1040ez Education Credits This benefit applies only to the counties in Table 1. 2012 tax form 1040ez The education credits have been expanded for students attending an eligible educational institution located in a Midwestern disaster area (Midwestern disaster area students) for any tax year beginning in 2008 or 2009. 2012 tax form 1040ez The Hope credit for a Midwestern disaster area student is increased to 100% of the first $2,400 in qualified education expenses and 50% of the next $2,400 of qualified education expenses for a maximum credit of $3,600 per student. 2012 tax form 1040ez The lifetime learning credit rate for a Midwestern disaster area student is increased from 20% to 40%. 2012 tax form 1040ez The definition of qualified education expenses for a Midwestern disaster area student also has been expanded. 2012 tax form 1040ez This expanded definition also applies to the tuition and fees deduction claimed on Form 8917. 2012 tax form 1040ez In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a Midwestern disaster area student include the following. 2012 tax form 1040ez Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. 2012 tax form 1040ez For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. 2012 tax form 1040ez For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. 2012 tax form 1040ez The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. 2012 tax form 1040ez The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. 2012 tax form 1040ez You will need to contact the eligible educational institution for qualified room and board costs. 2012 tax form 1040ez For more information, see Form 8863. 2012 tax form 1040ez See Form 8917 for the tuition and fees deduction. 2012 tax form 1040ez Recapture of Federal Mortgage Subsidy This benefit applies only to the counties in Table 1. 2012 tax form 1040ez Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. 2012 tax form 1040ez However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. 2012 tax form 1040ez This amount is increased to $150,000 if the loan was provided before 2011 and was used to alter, repair, or improve an existing owner-occupied residence in a Midwestern disaster area as shown in Table 1. 2012 tax form 1040ez Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. 2012 tax form 1040ez Generally, discharges of nonbusiness debts (such as mortgages) made on or after the applicable disaster date and before January 1, 2010, are excluded from income for individuals whose main home was in a Midwestern disaster area on the applicable disaster date. 2012 tax form 1040ez If the individual's main home was located in a Midwestern disaster area as shown in Table 2, the individual also must have had an economic loss because of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. 2012 tax form 1040ez This relief does not apply to any debt secured by real property located outside a Midwestern disaster area. 2012 tax form 1040ez You may also have to reduce certain tax attributes by the amount excluded. 2012 tax form 1040ez For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). 2012 tax form 1040ez Tax Relief for Temporary Relocation This benefit applies only to the counties in Table 1. 2012 tax form 1040ez The IRS can adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2008 or 2009 as a result of a temporary relocation caused by the severe storms, tornadoes, or flooding. 2012 tax form 1040ez However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. 2012 tax form 1040ez The IRS has exercised this authority as follows. 2012 tax form 1040ez In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. 2012 tax form 1040ez You can treat as a student an individual who enrolled in school before the applicable disaster date, and who is unable to attend classes because of the severe storms, tornadoes, or flooding, for each month of the enrollment period that individual is prevented by the severe storms, tornadoes, or flooding from attending school as planned. 2012 tax form 1040ez Additional Tax Relief for Businesses Employee Retention Credit This benefit applies only to the counties in Table 1. 2012 tax form 1040ez An eligible employer who conducted an active trade or business in a Midwestern disaster area can claim the employee retention credit. 2012 tax form 1040ez The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). 2012 tax form 1040ez Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). 2012 tax form 1040ez Use Form 5884-A to claim the credit. 2012 tax form 1040ez Employers affected by the severe storms, tornadoes, or flooding. 2012 tax form 1040ez   The following definitions apply to employers affected by the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Eligible employer. 2012 tax form 1040ez   For this purpose, an eligible employer is any employer who meets all of the following. 2012 tax form 1040ez Employed an average of not more than 200 employees on business days during the tax year before the applicable disaster date. 2012 tax form 1040ez Conducted an active trade or business on the applicable disaster date in a Midwestern disaster area. 2012 tax form 1040ez Whose trade or business was inoperable on any day after the applicable disaster date and before January 1, 2009, because of the damage caused by the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Eligible employee. 2012 tax form 1040ez   For this purpose, an eligible employee is an employee whose principal place of employment on the applicable disaster date with such eligible employer was in a Midwestern disaster area. 2012 tax form 1040ez An employee is not an eligible employee for purposes of the severe storms, tornadoes, or flooding if the employee is treated as an eligible employee for the work opportunity credit. 2012 tax form 1040ez Qualified wages. 2012 tax form 1040ez   Qualified wages are wages (up to $6,000 per employee) you paid or incurred before January 1, 2009, for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable disaster, and ending on the date your trade or business resumed significant operations at that place. 2012 tax form 1040ez In addition, the wages must have been paid or incurred after the applicable disaster date. 2012 tax form 1040ez    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. 2012 tax form 1040ez    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). 2012 tax form 1040ez Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. 2012 tax form 1040ez Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. 2012 tax form 1040ez   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. 2012 tax form 1040ez For a special rule that applies to railroad employees, see section 51(h)(1)(B). 2012 tax form 1040ez   Qualified wages do not include the following. 2012 tax form 1040ez Wages paid to your dependent or a related individual. 2012 tax form 1040ez See section 51(i)(1). 2012 tax form 1040ez Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. 2012 tax form 1040ez Wages for services of replacement workers during a strike or lockout. 2012 tax form 1040ez   For more information, see Form 5884-A. 2012 tax form 1040ez Employer Housing Credit and Exclusion This benefit applies only to the counties in Table 1. 2012 tax form 1040ez An employer who conducted an active trade or business in a Midwestern disaster area can claim the employer housing credit. 2012 tax form 1040ez The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from November 1, 2008, through May 1, 2009. 2012 tax form 1040ez The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). 2012 tax form 1040ez Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). 2012 tax form 1040ez The employer must use Form 5884-A to claim the credit. 2012 tax form 1040ez A qualified employee is an individual who had a main home in a Midwestern disaster area on the applicable disaster date, and who performs substantially all employment services in a Midwestern disaster area for the employer furnishing the lodging. 2012 tax form 1040ez The employee cannot be your dependent or a related individual. 2012 tax form 1040ez See section 51(i)(1). 2012 tax form 1040ez For more information, see Form 5884-A. 2012 tax form 1040ez Demolition and Clean-up Costs This benefit applies only to the counties in Table 1. 2012 tax form 1040ez You can elect to deduct 50% of any qualified disaster recovery assistance clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. 2012 tax form 1040ez Qualified disaster recovery assistance clean-up costs are any amounts paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the removal of debris from, or the demolition of structures on, real property located in a Midwestern disaster area that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. 2012 tax form 1040ez Qualified disaster recovery assistance clean-up costs are limited to amounts necessary due to damage attributable to the severe storms, tornadoes, or flooding in the Midwestern disaster areas. 2012 tax form 1040ez Increase in Rehabilitation Tax Credit This benefit applies only to the counties in Table 1. 2012 tax form 1040ez The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred on or after the applicable disaster date, and before January 1, 2012, on buildings located in a Midwestern disaster area as follows. 2012 tax form 1040ez For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. 2012 tax form 1040ez For certified historic structures, the credit percentage is increased from 20% to 26%. 2012 tax form 1040ez For more information, see Form 3468, Investment Credit. 2012 tax form 1040ez Request for Copy or Transcript of Tax Return Request for copy of tax return. 2012 tax form 1040ez   You can use Form 4506 to order a copy of your tax return. 2012 tax form 1040ez Generally, there is a $57 fee for requesting each copy of a tax return. 2012 tax form 1040ez If your main home, principal place of business, or tax records are located in a Midwestern disaster area, the fee will be waived if “Midwestern Disaster Area” is written in red across the top of the form when filed. 2012 tax form 1040ez Request for transcript of tax return. 2012 tax form 1040ez   You can use Form 4506-T to order a free transcript of your tax return. 2012 tax form 1040ez A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. 2012 tax form 1040ez You can also call 1-800-829-1040 to order a transcript. 2012 tax form 1040ez How To Get Tax Help Special IRS assistance. 2012 tax form 1040ez   The IRS is providing special help for those affected by the severe storms, tornadoes, or flooding, as well as survivors and personal representatives of the victims. 2012 tax form 1040ez We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by recent federally declared disasters, or who have other tax issues related to the severe storms, tornadoes, or flooding. 2012 tax form 1040ez Call 1-866-562-5227 Monday through FridayIn English–7 a. 2012 tax form 1040ez m. 2012 tax form 1040ez to 10 p. 2012 tax form 1040ez m. 2012 tax form 1040ez local timeIn Spanish–8 a. 2012 tax form 1040ez m. 2012 tax form 1040ez to 9:30 p. 2012 tax form 1040ez m. 2012 tax form 1040ez local time   The IRS website at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov has notices and other tax relief information. 2012 tax form 1040ez Check it periodically for any new guidance. 2012 tax form 1040ez You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. 2012 tax form 1040ez By selecting the method that is best for you, you will have quick and easy access to tax help. 2012 tax form 1040ez Contacting your Taxpayer Advocate. 2012 tax form 1040ez   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. 2012 tax form 1040ez Here are seven things every taxpayer should know about TAS: TAS is your voice at the IRS. 2012 tax form 1040ez Our service is free, confidential, and tailored to meet your needs. 2012 tax form 1040ez You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. 2012 tax form 1040ez TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. 2012 tax form 1040ez This includes businesses as well as individuals. 2012 tax form 1040ez TAS employees know the IRS and how to navigate it. 2012 tax form 1040ez We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. 2012 tax form 1040ez TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. 2012 tax form 1040ez You can call your local advocate, whose number is in your phone book, in Pub. 2012 tax form 1040ez 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov/advocate. 2012 tax form 1040ez You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. 2012 tax form 1040ez You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. 2012 tax form 1040ez taxtoolkit. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov. 2012 tax form 1040ez Low Income Taxpayer Clinics (LITCs). 2012 tax form 1040ez   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. 2012 tax form 1040ez LITCs are independent from the IRS. 2012 tax form 1040ez Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. 2012 tax form 1040ez If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. 2012 tax form 1040ez For more information, see Publication 4134, Low Income Taxpayer Clinic List. 2012 tax form 1040ez This publication is available at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. 2012 tax form 1040ez Free tax services. 2012 tax form 1040ez   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. 2012 tax form 1040ez It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. 2012 tax form 1040ez It also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on your telephone. 2012 tax form 1040ez   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. 2012 tax form 1040ez Free help with your return. 2012 tax form 1040ez   Free help in preparing your return is available nationwide from IRS-trained volunteers. 2012 tax form 1040ez The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. 2012 tax form 1040ez Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 2012 tax form 1040ez To find the nearest VITA or TCE site, call 1-800-829-1040. 2012 tax form 1040ez   As part of the TCE program, AARP offers the Tax-Aide counseling program. 2012 tax form 1040ez To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website atwww. 2012 tax form 1040ez aarp. 2012 tax form 1040ez org/money/taxaide. 2012 tax form 1040ez   For more information on these programs, go to www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov and enter keyword “VITA” in the upper right-hand corner. 2012 tax form 1040ez Internet. 2012 tax form 1040ez You can access the IRS website at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov 24 hours a day, 7 days a week to: E-file your return. 2012 tax form 1040ez Find out about commercial tax preparation and e-file services available free to eligible taxpayers. 2012 tax form 1040ez Check the status of your 2009 refund. 2012 tax form 1040ez Go to www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov and click on Where's My Refund. 2012 tax form 1040ez Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. 2012 tax form 1040ez If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). 2012 tax form 1040ez Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. 2012 tax form 1040ez Download forms, instructions, and publications. 2012 tax form 1040ez Order IRS products online. 2012 tax form 1040ez Research your tax questions online. 2012 tax form 1040ez Search publications online by topic or keyword. 2012 tax form 1040ez Use the online Internal Revenue Code, Regulations, or other official guidance. 2012 tax form 1040ez View Internal Revenue Bulletins (IRBs) published in the last few years. 2012 tax form 1040ez Figure your withholding allowances using the withholding calculator online at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov/individuals. 2012 tax form 1040ez Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant. 2012 tax form 1040ez Sign up to receive local and national tax news by email. 2012 tax form 1040ez Get information on starting and operating a small business. 2012 tax form 1040ez Phone. 2012 tax form 1040ez Many services are available by phone. 2012 tax form 1040ez Ordering forms, instructions, and publications. 2012 tax form 1040ez Call 1-800-TAX FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. 2012 tax form 1040ez You should receive your order within 10 days. 2012 tax form 1040ez Asking tax questions. 2012 tax form 1040ez Call the IRS with your tax questions at 1-800-829-1040. 2012 tax form 1040ez Solving problems. 2012 tax form 1040ez You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. 2012 tax form 1040ez An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. 2012 tax form 1040ez Call your local Taxpayer Assistance Center for an appointment. 2012 tax form 1040ez To find the number, go to www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. 2012 tax form 1040ez TTY/TDD equipment. 2012 tax form 1040ez If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. 2012 tax form 1040ez TeleTax topics. 2012 tax form 1040ez Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. 2012 tax form 1040ez Refund information. 2012 tax form 1040ez To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). 2012 tax form 1040ez Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. 2012 tax form 1040ez If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). 2012 tax form 1040ez Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. 2012 tax form 1040ez Refunds are sent out weekly on Fridays. 2012 tax form 1040ez If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. 2012 tax form 1040ez Other refund information. 2012 tax form 1040ez To check the status of a prior year refund or amended return refund, call 1-800-829-1954. 2012 tax form 1040ez Evaluating the quality of our telephone services. 2012 tax form 1040ez To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. 2012 tax form 1040ez One method is for a second IRS representative to listen in on or record random telephone calls. 2012 tax form 1040ez Another is to ask some callers to complete a short survey at the end of the call. 2012 tax form 1040ez Walk-in. 2012 tax form 1040ez Many products and services are available on a walk-in basis. 2012 tax form 1040ez Products. 2012 tax form 1040ez You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 2012 tax form 1040ez Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. 2012 tax form 1040ez Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. 2012 tax form 1040ez Services. 2012 tax form 1040ez You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. 2012 tax form 1040ez An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. 2012 tax form 1040ez If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. 2012 tax form 1040ez No appointment is necessary—just walk in. 2012 tax form 1040ez If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. 2012 tax form 1040ez A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. 2012 tax form 1040ez If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. 2012 tax form 1040ez All other issues will be handled without an appointment. 2012 tax form 1040ez To find the number of your local office, go to www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. 2012 tax form 1040ez Mail. 2012 tax form 1040ez You can send your order for forms, instructions, and publications to the address below. 2012 tax form 1040ez You should receive a response within 10 days after your request is received. 2012 tax form 1040ez Internal Revenue Service1201 N. 2012 tax form 1040ez Mitsubishi MotorwayBloomington, IL 61705-6613 DVD for tax products. 2012 tax form 1040ez You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. 2012 tax form 1040ez Prior-year forms, instructions, and publications. 2012 tax form 1040ez Tax Map: an electronic research tool and finding aid. 2012 tax form 1040ez Tax law frequently asked questions. 2012 tax form 1040ez Tax Topics from the IRS telephone response system. 2012 tax form 1040ez Internal Revenue Code—Title 26 of the U. 2012 tax form 1040ez S. 2012 tax form 1040ez Code. 2012 tax form 1040ez Fill-in, print, and save features for most tax forms. 2012 tax form 1040ez Internal Revenue Bulletins. 2012 tax form 1040ez Toll-free and email technical support. 2012 tax form 1040ez Two releases during the year. 2012 tax form 1040ez – The first release will ship the beginning of January 2010. 2012 tax form 1040ez – The final release will ship the beginning of March 2010. 2012 tax form 1040ez Purchase the DVD from National Technical Information Service (NTIS) at www. 2012 tax form 1040ez irs. 2012 tax form 1040ez gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). 2012 tax form 1040ez Prev  Up  Next   Home   More Online Publications